NNN Lease Explained

The first net is real estate taxes, billed to the tenant either directly or as a reimbursement to the landlord. The second is the property insurance premium, typically carried by the landlord and billed back, though some leases require the tenant to hold its own policy naming the landlord as an additional insured. The third, common area maintenance, covers parking lot upkeep, landscaping, snow removal, and shared-space repairs — a meaningful line item in a market like Park City where winter maintenance runs long and heavy.

None of the three nets automatically include the roof or the building's structural components; those stay with the landlord unless the lease specifically shifts them, which is the single most common point of confusion in a triple net deal.

A landlord under a triple net lease typically still carries the roof membrane, the structural walls and foundation, and any major system not explicitly assigned to the tenant, along with the obligation to keep the building in a condition that allows the tenant to operate. That residual exposure is exactly why lease term, tenant credit, and the age of the roof and HVAC systems all factor into how a buyer prices a net-leased property, not just the headline rent.

Under a gross lease, the landlord absorbs taxes, insurance, and maintenance inside a single rent number and takes on the risk that those costs rise faster than rent does. A modified gross lease splits the difference, with some expenses passed through and others absorbed. Triple net shifts nearly all of that variability to the tenant, which is precisely why net-leased rent streams price more like a fixed-income instrument than a typical operating lease.

A triple net lease reduces day-to-day management, but it does not eliminate landlord obligations entirely, and a landlord who assumes the tenant is handling everything can be caught off guard by a roof claim or a lease clause that turns out to assign less to the tenant than the marketing summary implied. The lease document, not the label "NNN," is the actual specification of who owes what.

Net-leased real estate is one of the most commonly identified replacement property types in a 1031 exchange, largely because the reduced landlord obligation and predictable rent make it easier to underwrite quickly inside a 45-day identification window than a property with an active operating component, like a hotel or a self storage facility with variable monthly leases. An exchanger comparing a triple net acquisition against a DST allocation is effectively choosing between owning one tenant relationship directly or owning a fractional interest in a portfolio managed by a sponsor, and the right answer depends more on how much direct control the exchanger wants to retain than on which option is inherently superior.

The gross versus net distinction also determines how a buyer should compare listings across different tenant types, since a gross-leased medical office and a net-leased pharmacy can show similar headline rent numbers while carrying entirely different expense exposure for the landlord over the hold period. Reading past the rent line to the expense structure underneath it is what separates a comparable-priced deal from one that only looks comparable.